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Capital in Disarray: a Libertarian Communist Analysis

Submitted by Flint on Tue, 04/06/2010 - 11:17

The subprime mortgage crisis that erupted in the United States has transformed into a global financial crisis. This crisis, which is being spun as a simple recession, is in fact one of the most serious crises since the 1929 Great Depression. As such, capitalism, on the brink of bankruptcy, has called on the State for help and is demanding that workers pay for the crisis by having their income reduced. As we can see by the rising numbers of unemployment and households struggling to survive, no one is left unharmed.

Numerous experts and economists have intervened to offer solutions that would, they hope, rehabilitate capitalism. They argue that the causes of this disaster are outside or foreign to capitalism. We do not agree. Let's be clear and identify what we believe are the true reasons behind this crisis that affects us all.

2007-2009: From one crisis to the next.

Since the bursting of the speculative bubble in 2007, the stock exchanges have been dropping with consequences that are well-known: massive loss of jobs, decline of wages and deterioration of working conditions, the rise of food and rent costs, inflation etc. In Canada, between October 2008 and March 2009, 357, 000 jobs were lost bringing the unemployment rate to its highest levels since the 1982 recession. In Quebec only, 55,000 workers lost their jobs in the same period and the unemployment rate rose to 8.3%. The Conference Board of Canada, a right-wing economic institute that for years has pushed for an unrestrained form of capitalism, is more and more pessimistic about an economic recovery. They have even stated that the unemployment rate could reach 10% in 2010.

At the same time, we have seen inflation go up by 2.4% in 2008. This is in large part due to a 7.4% rise in the price of foodstuffs (the price of vegetables alone went up 25.8%) and due to a 3% rise in rent between February 2008 and February 2009. Here we are just beginning to feel the effects of this. In other parts of the world, the rising cost of living has forced people to take to the streets to protest the effects of the crisis caused by capitalists and governments. Only in 2008, the price of rice rose by 30%, wich represent up to 70% of average income in the developping contries, a major disaster for billions of people who count on rise as their primary food staple. The rising cost of basic food staples is in large part due to major global investors that, by seeking shelter from the financial storm by investing in derivatives linked to food commodities, have ensured that the financial crisis has sparked a global food/hunger crisis. A growing number of countries are experiencing food shortages and famines at the same time that waste and the systematic destruction of production continues in the richer countries. An absurdity when we consider that humanity has never produced so much wealth. Added to these economic and food crises is a major ecological crisis (and all but irreversible), caused by the search for maximum profit without any other considerations.

Despite consumer goods becoming more expensive, during this same time the price of raw materials has dropped drastically by 30.7%. However, despite these lower costs of production, corporations are taking advantage of this crisis to restructure work so that they maintain high profits. For workers this means worse working conditions, reductions or loss of pensions, lockout and layoffs. We only have to think of Rio-Tinto-Alcan that laid off 1100 workers (and may lay off another 2000), or Bombardier who laid off almost 4,000 workers, or Pratt and Whitney who fired 500 workers or again the Journal de Montreal that has locked out several hundred workers.

It is at the very heart of the system that we find the causes of the crisis, nowhere else!

Economic crises are nothing new. Capitalism has always known such failures. Several economists have studied this phenomenon. Mainstream and neoliberal economists present the capitalist market as a natural phenomenon, always in balance. For them, crisis can only be caused by outside forces. In other words, the blame always lies with someone else other than them and their capitalist backers! For social democratic or Keynesian economists (left reformers such as the NDP), crisis is caused by a fall in demand. Thus the solution lies in stimulated the economy through public spending or other means of increasing demand. These two visions are inadequate and they lead to the belief that there exists a capitalism that can function better.

We believe that the under capitalism the cause of economic crises lies in the system's absolute need for always growing profits and in the need for ever expanding markets that make the realization of those profits possible. Here we find the central contradiction upon which capitalism is based. The search to make profits from their investments forces capitalists to increase productivity by all means possible. The result is overproduction, not underconsumption. It is this desperate search for profits via the constant rise of productivity and the consequent decline in employment which leads to the tendency for the rate of profit to fall. Economic crisis thus becomes inevitable and at the same time, revitalizing for the system. The surplus production built up in the system is destroyed during the course of the crisis and slowly the economy is re-stabilized as unprofitable sectors are eliminated. This process also sees mergers and bankruptcies which permit a growing concentration of wealth. Everything is thus in place to set capitalism down the road to the next crisis continued the boom and bust cycle.

The rich corporate owners will try anything possible to slow down the fall in the rate of profit. Among these means we find: imperialist expansion to gain cheaper raw materials or new markets, cheap or precarious labour, privatization, etc. Financialization or the shift of profits into financial speculation, is also a source of a higher rate of profit. The significant expansion of credit in the 20th century laid the foundations for the spread of finance. Then, during the 1970s, the end of the Bretton Woods foundation permitted the explosion of global finance without any restrictions to contain this fictious market. Fictious because the banks and the large investors have invented an entire arsenal of financial operations by which it is possible to make money from money. Contemporary alchemy on a massive scale.

The financialization of the economy has made general economic crises less frequent but more violent. In short, access to credit hides the existence of overproduction, allowing the economy to continue by relying on debt. Evidently, sudden financial shocks are frequent. That is to say that fictious money on the global financial markets often goes up in smoke without however dragging all the economy with it. However, when empires are built on fictious capital, the risk of uncontrollable spill-over effects are multiplied. This is what explains, in part, why we have gone from a financial crisis in one sector of the financial markets to a general economic crisis.

The complicity of the State: from right to left, illusionary and useless solutions.

The State is at the same time complicity in the crisis of capitalism and at the same time an essential force for its rehabilitation. Its complicity lies in its shameless support for the major multinational corporations. In short, governments put in place a number of tools that allowed the expansion of the financial markets, capital mobility, and the exploitation of human and nature. The States are always ready to us the stick or the carrot in order to help corporations create new profits. They also aim to control and manipulate society, either by the spectacle of elections or by repression, in order to make it easier for corporations to continue to exploit and pollute.

The State is also central to re-stabilizing the economy following a crisis. By using public funds and by going into debt (demonized during times of prosperity), the State steps in to save a corporation or a bank by taking over its debt or by stimulating the economy. It also ensures a minimal subsistence income to thousands of unemployed workers, whose existence allows for the reduction of wages. Thus, the State shows itself to be the central force that makes possible exist out of crisis.

In North America we have seen where the policies of the mainstream right wing political parties have taken us. All these parties promote neoliberal ideas to different degrees: cutbacks, privatizations, deregulation, etc. In contrast, against the traditional parties, the various social democratic or “socialist” would have us believe that their will do things differently. The problem with these left wing parties is that they refuse to attack the foundations of capitalism and instead are happy to propose superficial measures. They call for social housing, more public funding, increased taxes on major corporations and so on without ever mentioning that if we are in the situation that we find currently find ourselves in, it is because exploitation and injustice are the foundation and pillars of the capitalist system. In short, the left parties propose to give a new coat of paint to a house that is on the point of collapse, hoping all will turn out alright. Nonsense!

And where are the unions in all of this?

Historically, the union was a tool by which workers came together to resist exploitation and misery. However, today, the unions are playing an indispensable role in the maintenance of capitalism and this role becomes even more important during a time of crisis. The primary function of the union is to maintain the wage conditions above the psycological minimum determined by the capitalists and negotiate the exploitation of workers. The union bureaucracy assures a certain level of production and of “social peace” tailored to the economic context. In times of economic growth, unions demand increased wages while they seek to protect previous gains in downturns. It is thus to the advantage of the unions to seek an increased rate of exploitation of workers during crises in order to promote the rapid re-start of economic growth and thus begin again negotiations for better working conditions for their members. Because the labour movement has long ago abandoned the idea of doing away with capitalism or even if fighting the bosses effectively, it is more than necessary that workers organize independent of the union hierarchy, inside as well as outside of the unions. The radicalization of struggles and the creation of autonomous tendencies by workers, refusing all forms of compromise even within unions, can only increase the strength of the struggles and create links between them.

Redistribute wealth or we will help ourselves!

Evidently, capitalism will likely find a way out of this crisis, creating the conditions again where profits can be made without restraints. The State and the political parties of the right and left will continue to be the sidekicks of capitalism, doing what they can to allow the system to re-start the cycle that will lead to a new crisis. As for the unions, they will continue to buy the “social peace” by insignificant wage increases and improvements in our working conditions. Only our class is capable to do away with capitalism. It is up to us, and only us workers, the poor and precarious, students and others to deliver the fatal blow and create a society where production and consumption will be based on the principle of “from each according to their ability, to each according to their needs.” We should not fight for a more “humane” capitalism but rather for a system where the State, social classes, exploitation and oppression will be abolished. No form of reformism will work, only revolution will get us there. We must therefore organize and respond blow for blow to our exploiters.

Against layoffs, let's take over the companies and self-manage them!

Against landlords that throws us into the streets, let's throw them into the street, expropriate and administer ourselves the places where we live!

Against the State that everyday oppresses and humiliates us, let's organize for the general strike!

Capitalism is in agony. It is up to us to put it out of it's misery!

Text authored by the Union Communist Libertaire (Quebec)
Originally released on May 1, 2009.